Wednesday, September 24, 2008

To nourish social sectors

The budgeting process is planned as per changes forecast last yearAn incremental budget treats existing programmes and departments as already approved, subject only to increases or decreases in the financial resources allocated. The organisation’s historical costs are the base from which budget planning starts. The focus of budgeting process is on the changes anticipated in the last year’s figures. If the government is in a fairly stable environment, this approach may be satisfactory, provided there is a thorough review.

BSE Sensex is skyrocketing to near 20,000 points, glorifying our capital markets, FDI and FIIs are entering the Indian market in a major way, all of it giving a very fairy tale kind of a rosy picture of our economy. But what people fail to see, however, are the bottom 35% of our population, who live below the poverty line. The achievement of the economy will fall short of credibility if we do not address the endemic hunger, lack of education and low standard of public healthcare. Our per capita spending on education is $26 (annually), as against $8,900 in the US! Our health expenditure (per capita) is $24, while the US spends $6,096 per person per year! The rural housing programmes have not been successful either. The insurance cover is far lower than that in the West.

Despite its limitations, most rich nations follow Incremental Budgeting, whereas developing countries follow Repetitive Budgeting. India, with one-sixth of the world’s population, needs to urgently and massively increase its allocation in the social sector in order to rid itself of poverty, disease and illiteracy. Should not then this system of budgeting be taken into account?